Empirically testing the long-term quantity of money for Canada shows ________.
A) a strong positive relationship between inflation and money growth rates
B) a weak positive relationship between inflation and money growth rates
C) a weak negative relationship between inflation and money growth rates
D) a strong negative relationship between inflation and money growth rates

Question

Quizplus · Accepted Answer

Empirical studies on the quantity of money in Canada, similar to findings in other countries, generally show a strong positive relationship between the growth rates of money supply and inflation. This is consistent with the quantity theory of money, which posits that an increase in the money supply, if not matched by an increase in the production of goods and services, leads to inflation.

Empirically Testing the Long-Term Quantity of Money for Canada Shows